Should Verizon buy Netflix?

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last updated 8 January 2015

On Tuesday, an investment banker told Bloomberg that Verizon was "very serious" about buying Netflix, sending a flurry of rumors flying across the tech world. Just last week, it was reported that Verizon was considering launching its own streaming service to compete with Netflix. Would it make more sense for the company just to acquire Netflix? What would such a deal mean for Verizon, Netflix, and customers?

It wouldn't do either Netflix or Verizon any good: Though there are exploitable synergies between the two companies, they're better off remaining independent, says Todd Campbell at Seeking Alpha. Verizon already has a huge customer base and deals in place that will position it well in the future, as entertainment increasingly becomes about "seamlessly delivering content across TV, PC and mobile devices." And, while Netflix could surely use the acquisition cash, it wouldn't be enough given that its value has fallen from a market cap of $12 billion in July to just north of $4 billion. Netflix needs to "keep its focus where it should have been: On its customers," and work on growing its subscriber base, not selling out.

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Netflix has a little, but not a lot, to offer Verizon: Netflix would offer Verizon a "decent brand name," upwards of 23 million customers, and a wealth of content deals, Morningstar analyst Michael Hodel tells The Street. The Netflix customer base could be valuable to Verizon, and it might package Netflix with its other services, like Fios television. Netflix could also be added to Verizon Wireless. Still, Netflix has likely overpaid for its content deals, and those deals might have little value.

Ugh, this would be bad for customers: This deal could be "potentially terrible" for Netflix subscribers, says Jared Newman at TIME. They can currently access Netflix on computers, smartphones, and TVs regardless of their service provider. If Verizon bought Netflix, it could restrict the service to Verizon customers. And, while Verizon is a traditional service provider, Netflix "is a disruptor of traditional television services," so a Verizon-owned Netflix would have little motive to spend millions on deals to bring more content to Netflix. "Oh rumor mill, please don’t let it be true."